How to get private student loans with bad credit
College can be a life-changing experience, but with tuition fees on the rise and the high cost of living, traditional financial aid like federal student loans may not be enough to cover the cost. Many students take out private student loans to bridge the gap, but what if you have bad credit?
Having bad credit can make obtaining private student loans feel impossible. But don't give up just yet. There are still ways to secure private student loans if your credit score is on the low side.
Start by exploring your private student loan options now to see what you're eligible to receive.
How to get private student loans with bad credit
Before you start searching for private student loans, make sure you've exhausted your other financing options. Scholarships and grants don't need to be repaid and don't require a credit check. Federal student loans (except for Direct PLUS loans) also don't check your credit, and they typically have lower interest rates than private loans and offer the potential for loan deferment and forgiveness.
That said, if these options don't cover all of your education costs, private loans may be necessary. Most private student loans require a minimum credit score of between 600 and 700, but having a lower one doesn't mean you're out of luck. Here's how you can improve your likelihood of securing funds.
Get a co-signer
You can increase your chances of getting approved for a private student loan by getting a co-signer with a strong credit score. A co-signer is someone who agrees to pay back the loan if you can't. Having a co-signer could also secure you a lower interest rate.
However, keep in mind that finding a cosigner can be difficult, as they're committing to a significant financial responsibility. Be confident you can afford to repay the loan, or you risk damaging a relationship.
Compare student loan options online and see what you might qualify for.
Find a provider without credit score requirements
Not all private student loan lenders have the same credit requirements. Some are willing to work with students who have bad credit. Look for lenders who offer options like variable interest rates or repayment plans based on income. Be sure to read the terms and conditions carefully to ensure you understand the loan requirements and potential fees.
These loans have higher interest rates than others, but they can still provide you with the funding you need for your college expenses in a pinch. And you can always refinance your loan after graduation if your credit score improves, which can lower your rate.
Improve your credit
Taking steps to boost your credit may take some time, so it may not help your current approval chances. However, it could better your prospects for future student loan applications. Ways to improve your credit include paying down debt, making payments on time and getting a prepaid credit card.
The bottom line
If all else fails, there are alternative options to consider. You can look into an income share agreement (ISA), which provides money in exchange for a fixed percentage of your income after graduation. You can also take a gap year to work and save money before starting college or attend a community college, which is often less expensive than four-year universities.
Whatever route you wind up taking, don't let bad credit discourage you from finding ways to fund your education. You may have more options than you realize.
